hard · Principles of Finance
A firm has a 5-way DuPont decomposition of ROE with the following components: Tax Burden = 0.70, Interest Burden = 0.80, EBIT Margin = 15%, Asset Turnover = 1.20, and Equity Multiplier = 2.50.
If the firm successfully reduces its interest expense such that the Interest Burden rises to 0.90 while all other factors remain constant, what is the new ROE?
- 31.50%
- 28.35%
- 25.20%
- 11.34%
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